Gas Prices Rising

When consumers see an increase in the price of gasoline at the pump, they want to know why. The standard line is that the price of crude oil is rising. This is only partially true. And part of that reason can be attributed to speculators who invest in commodities.

During the Presidential campaign, some Republicans accused President Obama for rising fuel costs. The reality is, he doesn’t have that kind of power.

The truth is more complicated. Let’s begin with the fact that no new oil refineries have been built in the U.S. in almost 25 years. That means that if there are problems at a single oil refinery, and a part of it ceases production, gas prices will rise exponentially in that area. And oil companies are closing some outdated refineries

Most of the refineries in the eastern part of the United States are outdated, in severe need of being modernized to accommodate production of different types of crude. These older refineries are set up to process on the Brent, “sweet” crude, which is a blend of 15 oil fields in the North Sea. Because it has a lower sulphur content, it is easier to refine. The price of Brent has been rising.

Refineries in the mid-west are able to process the “sour” crude. This oil comes from Western Canada, South America, and the deep waters of the Gulf of Mexico. They also have access to West Texas Intermediate crude, a product that is similar to Brent, but less expensive. Refineries in the east do not have the ability to receive WTI. For these reasons, the mid-west facilities are flourishing, while those in the east are losing money and shutting down.

So what is the answer? Oil prices do not reflect the laws of “supply and demand”. Oil companies dictate the price we pay at the pump. The government continues to subsidize the oil industry, even though they are reporting all-time record profits.

They are not re-investing in their infrastructure. This is the prime reason for rising costs. A secondary reason is that, just like in the 70’s, consumers are purchasing vehicles that are more efficient. Receiving more miles per gallon, means less frequent purchase of gasoline. Some refineries have slowed production, to keep fuel prices high, and even increase, so the companies can maintain their excessive profits.

The purpose of a corporation is to make money, that’s what capitalism is all about. What they are not responsible for is the predicament of their consumers. The majority of Americans are dependent on their vehicles to get them to and from work, to purchase household necessities, such as food and clothing, to transport their children where needed, and to allow seniors to go to medical facilities when necessary.

If I didn’t have to, I would never drive again. Driving a car has become more of an irritation than a pleasure. I do think about being efficient in my travels, conserving gasoline. Being on a fixed income will do that to you. But I am also tired of avoiding so many unskilled drivers, or drivers that spend more time on their phones than attention to the road and traffic. So, for me, if people drive less because gas prices are too high, that’s a good thing. But, unfortunately they don’t mean it, they’re just saying they’ll drive less. Americans have two loves, their vehicle, and their iPhones. Unfortunately they’re inseparable as well.